When you first apply for a loan, of course, you have the intention to pay it but some instances may happen which make it harder for you to pay. It may be an unexpected job loss, injury, medical emergency, natural disaster, or family problem. Do know that whichever the reason, if you don’t pay or missed a payment, you will face a loan default. If you want to know more about what happens if you stop paying loan, this might help you.
Here’s What Happens If You Stop Paying the Loan:
What is a Loan Default?
A personal loan in default means payment is late by 30 to 90 days. The exact timing will depend on the type of loan you get, the lender, and the terms of your loan agreement.
What will happen if you stop paying loans?
Your credit score will suffer
If you don’t pay your loan on time or missed a payment, your credit score will be the first to suffer. Do note that if you don’t pay your loan, the bank will report it to the credit bureau which is in charge to calculate your credit score. If your credit score isn’t good, it will be difficult for you to obtain a loan or a credit card in the future.
Trouble securing a new credit card
As mentioned above, if you don’t pay your loan or missed a payment, your credit score will drop. Once your credit score drops, the bank may not approve your request for a new credit card.
Car or home will be repossessed
If you apply for a car loan or home loan, the property isn’t really yours unless you paid it in full. So it means that if you fail your pay your loan, they have the authority to take it back.
Get fewer benefits from the government
The benefits you will receive may be reduced if you don’t pay your loans. For instance, if your SSS Salary Loan has defaulted, the loan balance plus the penalty and interest will be deducted from your retirement, disability, or death benefits.
Can you be imprisoned if you don’t pay?
Not paying your debts will not lead to imprisonment. The law indicates that no one can go to jail for not being able to pay debts. However, it doesn’t mean that you can’t get away with it. If you don’t pay your loan and begin to commit fraudulent acts, you will face charges. So think twice before doing that. In addition, it is your responsibility to pay for the loan you got.
What to do if you face loan default?
- Once you know there’s a chance you will face a loan default, you should contact the lender right away. Tell them before your next payment is due because some lenders are kind enough to provide options for you.
- Know your rights. Don’t be scared, conduct research and know what you should do.
- If the situation got worst, contact a lawyer. If in case a bank file a lawsuit against you, it is important that you seek legal help from the professionals.
As a final point, if any chance you face this kind of situation all you need to do is keep calm and contact the bank right away. Just remember that it is your responsibility to pay back the loan you owe.